COMPREHENSIVE BUDGETING EXERCISES 1. Purchase Budget – Budget – Merchandising Merchandising Business
Gerdie Company has the following information: Month Budgeted Sales March $50,000 April 53,000 May 51,000 June 54,500 July 52,500 In addition, the gross profit rate is 40% and the desired inventory level is 30% of next month's cost of sales. Required: Prepare a purchases budget for April through June. 2.
Production & Raw Materials Purchase Budget
Lubriderm Corporation has the following budgeted sales for the next six-month period: June 90,000 August 210,000 October 180,000 July 120,000 September 150,000 November 120,000 There were 30,000 units of finished goods in inventory at the beginning beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month. Five pounds of materials are required required for each unit produced. produced. Each pound of material material costs $8. Inventory levels for materials are equal to 30% of the needs for the next next month. Materials inventory on June 1 was 15,000 pounds. Required: a. Prepare production budgets in units for July, August, and September. September. b. Prepare a purchases purchases budget in pounds for July, August, and September, and and give total total purchases in both pounds and dollars for for each month. 3.
Production and related schedules
The Jansen Company manufactures and sells two products: plastic boxes and plastic trays. Estimated needs for a unit of each are Boxes Trays Material A 2 pounds 1 pound Material B 4 pounds 4 pounds Direct labor 2 hours 2 hours Overhead is applied on the basis of $2 per direct labor hour. The estimated sales by product for 2000 are: Boxes Trays Sales 42,000 24,000 The beginning inventories are expected to be as follows: Material A 4,000 pounds Material B 6,000 pounds Boxes 1,000 units Trays 500 units The desired inventories are one month's production requirements, assuming constant sales throughout the year. Prepare the following information: A. Production schedule B. Purchases budget in units C. Direct labor budget in hours D. Overhead to be charged to production 4.
Cash Receipts & Cash Disbursements
The following are forecasts of sales and purchases for a company. Sales Purchases April $80,000 $30,000 May 90,000 40,000 June 85,000 30,000 All sales are on credit. Records show that 70 percent of the customers pay the month of the sale, 20 percent pay the month after the sale, and the remaining 10 percent pay the second month after the sale. Purchases are all paid the following month at a 2 percent discount. Cash disbursements for operating expenses in June were $5,000. REQUIRED: Prepare a schedule of cash receipts and disbursements for June.
5.
Increase in Cash
Jackson Fabrics has prepared a forecast for May 2000. Some of the projected information follows: Income after tax $260,000 Accrued Income Tax Expense 62,000 Increase in Accounts Receivable for month 41,000 Decrease in Accounts Payable for month 18,300 Depreciation Expense 71,200 Estimated Bad Debts Expense 13,100 Dividends declared 20,000 Using the above i nformation, what is the company’s projected increase in cash for May 2000? 6.
Cash Budget & Financing Gap
Bagel Factory Inc. prepared cash cash estimates for the next four months. months. The following estimates were developed for certain items: Item March April May June Cash sales $10,000 $6,000 $8,000 $11,000 Credit sales 5,000 2,000 6,000 9,000 Payroll 2,000 1,500 2,500 3,000 Purchases 3,000 2,600 2,800 4,000 Other expenses 2,500 2,400 2,600 2,800 In February, credit credit sales totaled $9,000, and purchases totaled $5,000. January credit sales sales were $12,000. Accounts receivable collections amount to 30% in the month after the sale and 60% in the second month after the sale; 10% of the receivables receivables are never collected. Payroll and other expenses are paid in the month incurred. Seventy-five percent of the purchases are paid in the month incurred, and the remainder remainder are paid in the following month. month. A $15,000 tax payment is due on June 15. 15. The cash balance was $5,000 on March 1. The company wants wants a minimum cash balance of $5,000 per month. Required: (1) Prepare a cash budget for the four-month period, March through June. (2) List the amount of funds available available for investing or required for borrowing in each month. 7.
Cash budget
The January 31, 1999, balance sheet of Sara's Plaques follows: Assets Cash $12,000 Accounts Receivable (Net of Allowance for Uncollectibles of $1,440) 34,560 Inventory 52,400 Plant Assets (Net of Accumulated Depreciation of $60,000 36,000 Total Assets $134,960 Accounts Payable Common Stock Retained Earnings (Deficit) Total Liabilities & Stockholders’ Equity
Liabilities and Stockholders' Equity $70,200 90,000 (25,240) 64,960 $134,960
Additional information about the the company includes the following: Expected sales for February and March are $120,000 and $130,000, respectively. The collection pattern from the month of sale forward is 50%, 48%, and 2% uncollectible. Cost of goods sold is 75% of sales. Purchases each month are 55% of the current month’s sales and 45% of the next month’s projec ted sales. All purchases are paid for in full in the month following purchase. Other cash expenses each month are $21,500. The only noncash expense each month is $4,000 of depreciation. Required: a. What are budgeted cash collections for February 2000? b. What will be the inventory inventory balance balance at February February 29, 29, 2000? c. What will be the projected balance in Retained Earnings at February February 29, 2000? d. If the company wishes to maintain a minimum cash cash balance of $8,000, how much will be available for investment or need need to be borrowed at the end of February 2000?
8.
Budgeted Cost Of Goods Manufactured And Sold Statement
WKRP, Inc., with $50,000,000 of par stock outstanding, outstanding, plans to budget earnings earnings of 10%, before income tax, on on this stock. The Marketing Department budgets sales at $40,000,000. The budget director approves the sales budget and expenses as follows: Marketing 20% of sales Administrative 10% of sales Labor is expected to be 50% of the total manufacturing cost; materials issued for the budgeted production will cost $12,500,000; therefore, any savings in manufacturing cost will have to be in factory factory overhead. Inventories are to be as follows: Beginning of Year End of Year Finished goods $8,000,000 $10,000,000 Work in process 1,000,000 3,000,000 Materials 5,000,000 4,000,000 Required: Prepare the budgeted cost of goods manufactured and sold statement, showing the budgeted purchases of materials and the adjustments for inventories of materials, work in process, and finished goods. 9.
Budgeted Income Statement
The management of Podunk Podunk Pottery Co. would like to earn 20% on its invested capital of $4,000,000. $4,000,000. The company estimates sales of 100,000 pots during the coming year ending December December 31. Sales commissions are paid at the rate of 10% of the the sales price. Other expenses are as follows: Variable manufacturing expenses 30% of sales Fixed manufacturing expenses $ 100,000 Fixed general and administrative expenses $ 25,000 Required: (1) Compute the the dollar amount of target target net income. (2) Prepare a budgeted income statement for the coming year. 10. Pro forma income statement
Bennett Novelty Wholesale Store has prepared the following budget information for May 2001: Sales of $300,000. All sales are on account and a provision for bad debts is made monthly at 3 percent of sales. Inventory was $70,000 on April 30 and an increase of $10,000 is planned for May. inventory is marked marked to sell at cost plus plus 50 percent. percent. All inventory Estimated cash disbursements for selling and administrative expenses for the month are $40,000. Depreciation for May is projected at $5,000. Prepare a pro forma income statement for Bennett Novelty Wholesale Store for May 2001.
11. Kaizen-Based Income Statement
Allscott Company is developing developing its budgets for 20x5 and, for the first time, will use the kaizen approach. The initial 20x5 income statement, statement, based on static data from 20x4, is as follows: Sales (140,000 units) $420,000 Less: Cost of goods sold 280,000 Gross margin 140,000 Operating expenses (includes $28,000 of depreciation) 112,000 Net income $28,000 Selling prices for 20x5 are expected to increase by 8%, and sales volume in units will decrease by 10%. The cost of goods sold as estimated by the kaizen approach will decline by 10% per unit. Other than depreciation, all other operating costs are expected to decline by 5%. Required: Prepare a kaizen-based budgeted income statement for 20x5. 12. Projected Income Statement and Balance Sheet
Russell Company has the following projected account balances for June 30, 20x3: Accounts payable $40,000 Sales $800,000 Accounts receivable 100,000 Capital stock 400,000 Depreciation, factory 24,000 Retained earnings ? Inventories (5/31 & 6/30) 180,000 Cash 56,000 Direct materials used 200,000 Equipment, net 240,000 Office salaries 80,000 Buildings, net 400,000 Insurance, factory 4,000 Utilities, factory 16,000 Plant wages 140,000 Selling expenses 60,000 Bonds payable 160,000 Maintenance, factory 28,000 Required:
a. b.
Prepare a budgeted income statement for June 20x3. Prepare a budgeted balance sheet as as of June 30, 20x3.
13. Budget income statement and purchases budget (6-9)
Olson Sporting Goods has the following sales forecast for the first four months of 20X9. January $70,000 February 70,000 March 90,000 April 80,000 Olson’s cost of sales is 60% of sales. Fixed costs are $12,000 per month. Olson maintains inventory at 150% of the coming month’s budgeted sales requirements and has $55,000 inventory at January 1. Required: 1. Prepare a budgeted income income statement for for the first three months of 20X9, in total, not by month. 2. Prepare a purchase budget for the first three months of of 20X9 b month. 14. Cash budget and pro forma balance sheet (continuation of 6-9)
Olson pays for its purchases 40% in the month of of purchase, 60% in the following month. Olson collects 60% of its sales in the month of sale, 40% in the following month. All fix costs require cash disbursements. disbursements. Olson’s balance sheet at December 31, 20X8 appears below. below. Assets Equities Cash $ 20,000 Accounts payable $ 18,000 Receivables 30,000 Inventory 55,000 Stockholders’ equity equity 87,000 Total $105,000 Total $105,000 Required: 1. Prepare a cash receipts budget for each of the first three months of 20X9 and for the quarter as a whole. whole. 2. Prepare a cash disbursement budget for each each of the the first three months of 20X9 and for the quarter as a whole. 3. Prepare a cash budget for each of the first three months months of 20X9 20X9 and for for the quarter quarter as a whole. 4. Prepare a pro forma balance balance sheet as of of March 31, 20X9. 15. Budget for a manufacturer (6-15)
Odell Company manufactures a small cabinet for cassette tapes. Its sales budget for the first three three months of 20X0 is as follows. January $2,000 (50 units) February $2,200 (55 units) March $1,800 (45 units) Variable manufacturing costs are $ 26 per unit, of which $12 is for materials. Odell’s fixed manufacturing costs are $150 per month, including $40 of depreciation. Its only variable selling cost is a 15% sales commission. Fixed selling and administrative administrative costs are $70 per month. Odell maintains no inventory of finished cabinets. Required: Prepare a budgeted income statement for Odell for January. 16. Production budget for a manufacturer (continuation of 6-15)
Because Odell carries no inventory of finished cabinets, its production, in un its, is the same same as its sales. Odell’s $12-per $12 -per – –unit unit materials cost is for 4 pounds of materials at a price of $3 per pound. Required: Prepare a budget for production costs for January showing as much details as the facts permit. 17. Purchases budget for a manufacturer (continuation of 6-15 and 6-16)
Odell’s policy is to maintain an inventory of material at 20% of production in the upcoming month. At December 31, 20X9, Ode ll had 34 pounds of material that cost $102. Required: Prepare a materials purchases budget for Odell for January, in units and dollars. 18. Understanding budgets
Following are Blaisdel Company’s balance sheet at December 31, 20X0, and information regarding Blaisdel’s policies and past e xperiences. Blaisdel Company Balance Sheet at December 31,20X0 Assets Equities Cash $ 33,000 Accounts payable $ 9,000 Receivables 31,000 Income taxes payable 8,000 Inventory 59,000 Common stocks 180,000 Fixed assets, net 102,000 Retained earnings 28,000 Total $225,000 Total $225,000
Additional information: A. All sales are on credit and are collected 20% in the month of sale and 80% in the month after sale. B. Budgeted sales sales for the first five months of 20X1 are $50,000, $60,000, $70,000, $70,000, $66,000, $66,000, and $65,000, respectively. respectively. C. Inventory in maintained at budgeted sales sales requirements for the following two months. D. Purchases are all on on credit and are paid 80% in the month of of purchase and 20% in the month after purchase. E. Other variable cost are 20% of sales and are paid in the month incurred. F. Fixed costs are $6,000 $6,000 per month, including $1,000 of depreciation. depreciation. Cash fixed costs are paid in the month incurred. G. Blaisdel’s income tax rate is 25%, with taxes being paid in the month after they are accrued. H. Cost of goods sold is expected to be 60% of sales. Required: 1. What are budgeted cash receipts for January 20X1? 2. What is the the budgeted inventory at January 31, 20X1? 3. What are budgeted purchases for January 20X1? 4. What is budgeted net income for January 20X1? 5. What is the budgeted cash balance at the end of of January January 20X1? 6. What are budgeted accounts receivable at February 28, 20X1? 7. What is the budgeted book value of fixed assets at at March 31, 20X1? 20X1? 8. What are budgeted accounts payable at March 31, 20X1? 9. If Blaisdel declared a cash dividend of $1,200 during January, payable in February, February, what balance balance would be reported for retained earnings in a pro forma balance shet as of January 31, 20X1? 10. What amount would would show as the liability for income taxes as of March 31, 20X1? 19. Comprehensive
Webster Company has the following sales budget. January $200,000 March $300,000 February $240,000 April $360,000 Cost of sales is 70% of sales. Sales are collected 40% in the month of sale and and 60% in the following month. Webster keeps inventory equal to double the coming month's budgeted sales requirements. It pays for purchases 80% in the month of purchase and 20% in the month after purchase. Inventory at the beginning of January is $190,000. Webster has monthly fixed costs of $30,000 $30,000 including $6,000 $6,000 depreciation. Fixed costs requiring cash are paid as incurred. Required: a. Compute budgeted cash receipts in March. b. Compute budgeted accounts receivable at the end of March. c. Compute budgeted inventory at the end of February. d. Compute budgeted purchases in February. e. March purchases purchases are $290,000. Compute budgeted budgeted cash payments payments in March to suppliers of goods. f. Compute budgeted accounts payable for goods at the end of February. g. Cash at the end of February is $45,000. Cash disbursements are not required for anything anything other than payments to suppliers suppliers and fixed costs. Compute the budgeted cash balance at the end of March.
SOLUTIONS 1.
April $ 9,180 31,800 40,980 9,540 $31,440
Desired ending inventory Plus COGS Total needed Less beginning inventory Total purchases 2.
a. Budgeted sales Add: Required ending inventory inventory Total inventory requirements Less: Beginning inventory Budgeted production b. Production in units Targeted ending inventory in lbs.* Production needs in lbs.*** Total requirements in lbs. Less: Beginning inventory in lbs. Purchases needed in lbs. Cost ($8 per lb.) Total material purchases * ** *** ****
3.
a.
May $ 9,810 30,600 40,410 9,180 $31,230 July 120,000 42,000 162,000 24,000 138,000 July 138,000 297,000 690,000 987,000 ****207,000 780,000 x $8 $6,240,000
Total $ 9,450 95,100 104,550 9,540 $ 95,010
August 210,000 30,000 240,000 42,000 198,000
September 150,000 36,000 186,000 30,000 156,000
August 198,000 234,000 990,000 1,224,000 297,000 927,000 x $8 $7,416,000
September 156,000 **252,000 780,000 1,032,000 234,000 798,000 x $8 $6,384,000
0.3 times next month's needs (180,000 + 24,000 - 36,000) times 5 lbs. x 0.3 5 lbs. times units to be produced (690,000 x .3) = 207,000 lbs. Boxes 42,000 3,500 45,500 (1,000) 44,500
Production budget
Units of sales Units desired in ending inv. Units needed Units in beginning inv. Budgeted production b.
June $ 9,450 32,700 42,150 9,810 $32,340
Purchases budget - Material A
Units needed for production (89,000 + 25,500) Required ending inventory (annual units ÷ 12) Total requirements Less beginning inventory Pounds to be purchased
Trays 24,000 2,000 26,000 (500) 25,500
Total 114,500 9,542 124,042 (4,000) 120,042
Purchases budget - Material B
Units needed for production (178,000 + 102,000) Required ending inventory (annual units ÷ 12) Total requirements Less beginning inventory Pounds to be purchased c.
Direct labor budget
Required hours d.
280,000 23,333 303,333 (6,000) 297,333
89,000 51,000 140,000
Overhead budget
Activity base (hours) Multiply by rate Overhead cost
89,000 × $2 $178,000
51,000 × $2 $102,000
$280,000
4.
Schedules of Cash Receipts and Disbursements for June Cash Receipts:
From current month sale (June) From 1 month prior sale (May) From 2 month prior sale (April) Total cash receipts
(.7 85,000) (.2 90,000) (.1 80,000)
$59,500 18,000 8,000 $85,500
(.98 40,000)
$39,200 5,000 $44,200 $41,300
Cash Disbursements:
May purchases @ 98% (less discount) Operating expenses Total cash disbursements Net increase in cash for June
5.
Income after taxes Accr. income tax expense (no cash involved) Increase in A/R (collected less than sold) Decrease in A/P (paid for more than purch.) Depreciation (no cash involved) Estimated bad debts (no cash involved) Projected increase in cash
$260,000 62,000 (41,000) (18,300) 71,200 13,100 $347,000
Note: The declaration of a dividend does not affect cash, nor does it affect net income for the period. 6.
(1)
Bagel Factory Inc. Cash Budget For March-June, 19--
Receipts from: Cash sales January credit sales (60% x $12,000) February credit sales: 30% x $9,000 60% x $9,000 March credit sales April credit sales May credit sales Total receipts Disbursements for: Payroll Other expenses February purchases (25% x $5,000) March purchases April purchases May purchases June purchases Tax payment Total disbursements Net increase (decrease) in cash Cash balances: Beginning Ending (2) Available for investing Needed to borrow $5,500 + $5,000 minimum cash balance
March
April
May
June
$10,000 7,200 2,700 — — — — $19,900
$6,000 — — 5,400 1,500 — — $12,900
$8,000 — — — 3,000 600 — $11,600
$11,000 — — — — 1,200 1,800 $14,000
$2,000 2,500 1,250 2,250 — — — — $8,000 $11,900
$1,500 2,400 — 750 1,950 — — — $6,600 $6,300
$2,500 2,600 — — 650 2,100 — — $7,850 $3,750
$3,000 2,800 — — — 700 3,000 15,000 $24,500 $(10,500)
5,000 $16,900
5,000 $11,300
5,000 $8,750
5,000 $ (5,500)
$11,900 —
$6,300 —
$3,750 —
— $10,500
7.
Cash Budget
a.
(72,000* × 0.48) + ($120,000 × 0.50) = $94,560 $94,560 *January sales: ($34,560 + $1,440) ÷ 0.50 = $72,000
b.
Beginning inventory Purchases ($120,000 × 0.75 × 0.55) +($130,000 × 0.75 × 0.45) Cost of Goods Sold ($120,000 × 0.75) Ending inventory
$ 52,400 93,375 (90,000) $ 55,775
c.
First, determine expected earnings for February: Sales CGS Gross margin Operating expenses Net income
$120,000 (90,000) $ 30,000 (25,500) $ 4,500
Retained earnings, beginning balance Earnings Ending balance
$(14,000) 4,500 $( 9,500)
Beginning balance Cash collections Cash available Cash disbursements: Accounts Payable Other Cash excess
$ 12,000 94,560 $106,560
d.
$70,200 21,500
91,700 $ 14,860
Since there is a cash excess of $14,860, ($14,860 - $8,000) = $6,860 is available for investment.
WKRP, Inc. Budgeted Cost of Goods Manufactured and Sold Statement For Year Ending December 31, 19--
8.
Materials: Beginning inventory Purchases Materials available for use Less ending inventory Cost of materials used Labor Factory overhead Total manufacturing cost Add beginning work in process inventory Deduct ending work in process inventory Cost of goods manufactured Add beginning finished goods goods inventory Cost of goods available for sale Deduct ending finished goods inventory Cost of goods sold 1
Earnings (10% of $50,000,000 = 5,000,000) Marketing and administrative expenses Cost of goods sold ($23,000,000)
2.
$5,000,000 11,500,0005 $16,500,000 4,000,000 $12,500,000 13,500,000 1,000,0004 $27,000,0003 1,000,000 $28,000,000 3,000,000 $25,000,0002 8,000,000 $33,000,000 10,000,000 $23,000,0001 12.5% of sales 30.0% 42.5 % of sales 57.5% 100.0% of sales
Cost of goods sold + Ending finished goods inventory + Beginning finished finished goods inventory = Cost of goods goods manufactured $23,000,000 + $10,000,000 – $8,000,000 – $8,000,000 = $25,000,000
9.
3
Costs of goods manufactured + Ending work in process inventory – Beginning – Beginning work in process inventory = Total manufacturing cost (materials, labor, and factory overhead) $25,000,000 + $3,000,000 – $1,000,000 – $1,000,000 = $27,000,000
4
Total manufacturing cost – cost – Labor Labor (50% of manufacturing cost) – Cost – Cost of materials used = Factory overhead $27,000,000 – $27,000,000 – $13,500,000 $13,500,000 – – $12,500,000 $12,500,000 = $1,000,000
5
Cost of materials used + Ending materials inventory – Beginning – Beginning materials inventory =Materials purchases $12,500,000 + $4,000,000 – $5,000,000 – $5,000,000 = $11,500,000
(1) The net income must equal 20% of $4,000,000, or $800,000. (2)
Podunk Pottery Company Budgeted Income Statement For Year Ending December 31, 19-Sales Less cost of goods sold: Variable manufacturing expenses Fixed manufacturing expenses Gross profit Sales commissions Fixed general and administrative expenses Net income
$1,541,667 $462,500 100,000 $154,167 25,000
562,500 $979,167 179,167 $800,000
Bennett Novelty Wholesale Store Pro Forma Income Statement For the Month Ended May 31, 2001
10.
Sales Cost of goods sold ($300,000 1.5) Gross margin Selling and administrative expenses Depreciation expense Bad debts expense ($300,000 × 3%) Net income
$300,000 (200,000) $100,000 $40,000 5,000 9,000
54,000 $ 46,000
11. Sales (126,000 x $3.24)
$408,240 226,800 181,440 107,800 $ 73,640
Less: COGS (126,000 x $1.80) Gross margin Operating expenses ($28,000 + $79,800) Net income 12. a.
Income Statement For the Month of June 20x3 Sales Cost of goods sold: Materials used Wages Depreciation Insurance Maintenance Utilities Gross profit Operating expenses: Selling expenses Office salaries Net income
$800,000 $200,000 140,000 24,000 4,000 28,000 16,000 $60,000 80,000
412,000 $388,000 140,000 $248,000
b.
Russell Company Balance Sheet June 30, 20x3 Assets:
Cash Accounts receivable Inventories Equipment, net Buildings, net Total
Liabilities and Owners’ Equity:
$ 56,000 100,000 180,000 240,000 400,000 $976,000
Accounts Accounts payable Bonds payable Capital stock Retained earnings*
$ 40,000 160,000 400,000 376,000
Total
$976,000
*$976,000 – *$976,000 – ($40,000 ($40,000 + $160,000 + $400,000) = $376,000 13. Budgeted Income Statement and Purchases Budget (20 minutes)
1.
Budgeted income statement for first three months of 20X9 Sales ($70,000 + $70,000 + $90,000) $230,000 Cost of sales at 60% 138,000 Gross profit 92,000 Fixed costs ($12,000 x 3) 36,000 Income $ 56,000
2.
Purchases budget January $ 42,000 63,000 105,000 55,000 $ 50,000
February $ 42,000 81,000 123,000 63,000 $ 60,000
March $ 54,000 72,000 126,000 81,000 $ 45,000
Total $138,000 72,000 210,000 55,000 $155,000
Cost of sales* Desired ending inventory** Total requirements Beginning inventory Purchases * 60% of month's sales **1.5 x coming month's cost of sales; $63,000 = 1.5 x $42,000; $81,000 =1.5 x $54,000; $72,000 = 1.5 x $80,000 x .60 (April cost of sales) Note to the Instructor: We urge stressing that that inventory, and hence purchases, purchases, must be stated in cost dollars, not selling prices. Despite the attention paid to this point in the chapter, some students will insist on interpreting "one and one-half times the coming month's budgeted sales" as meaning that inventory is 1.5 times sales for the coming month, not cost of sales. 14. Cash Budget and Pro Forma Balance Sheet (Continuation of 6-9) (20-25 minutes)
1.
Cash receipts budget Sales budget Collections from: Current month (60%) Prior month (40%) Total
2.
January $ 70,000
February $ 70,000
March $ 90,000
Total
$ 42,000 30,000 $ 72,000
$ 42,000 28,000 $ 70,000
$ 54,000 28,000 $ 82,000
$138,000 86,000 $224,000
Cash disbursements budget Purchases (6-9) Payments for purchases: Current month (40%) Prior month (60%) Fixed costs Total
January $ 50,000
February $ 60,000
March $ 45,000
Total
$ 20,000 18,000 12,000 $ 50,000
$ 24,000 30,000 12,000 $ 66,000
$ 18,000 36,000 12,000 12,000 $ 66,000
$ 62,000 84,000 36,000 $182,000
3. Cash budget Beginning balance Receipts Available Disbursements Ending balance
January $ 20,000 72,000 92,000 50,000 $ 42,000
February $ 42,000 70,000 112,000 66,000 $ 46,000
March $ 46,000 82,000 128,000 66,000 $ 62,000
Total $ 20,000 224,000 244,000 182,000 $ 62,000
4.
Pro Forma Balance Sheet as of March 31, 20X9
Assets
Cash (cash budget) Accounts receivable (40% of March sales of $90,000) $90,000) Inventory (6-9 purchases budget) Total assets
$ 62,000 36,000 72,000 $170,000
Accounts payable (60% x $45,000 $45,000 March purchases) Stockholders' equity Total equities * $87,000 beginning balance + $56,000 income, from 6 -9
$ 27,000 143,000* $170,000
Equities
15. Budgeted Income Statement for for a Manufacturer (5-10 minutes)
Sales (50 units x $40) Variable costs: Manufacturing, materials (50 x $12) other (50 x $14) Commissions, 15% of sales Contribution margin Fixed costs, manufacturing other Profit
$2,000 $ 600 700 300
1,600 400
$ 150 70
220 $ 180
16. Production Budget for a Manufacturer Manufacturer (Continuation of 6-15) (5-10 minutes)
Variable manufacturing costs (50 units): Materials (50 units x 4 lbs. per unit x $3 per lb.) Other variable manufacturing cost [50 units x ($26 - $12)] Fixed manufacturing costs Total production cost
$ 600 700 150 $1,450
17. Purchases Budget for a Manufacturer (Continuation of 6-15 and 6-16) (10 minutes)
Material needed for production (50 units x 4 lbs.) Material needed for ending inventory 55 units x 4 lbs. x 20% Total required Material in beginning inventory, given Required purchases
Pounds 200 44 244 34 210
18. Understanding Budgets (20 minutes)
1.
$41,000 Receivable at December 31, 20X0 Collected on January sales ($50,000 x 20%) Total
$ 31,000 10,000 $ 41,000
2. $78,000 [($60,000 + $70,000) $70,000) x 60%] 3.
4.
$49,000 January cost of sales, $50,000 x 60% Required ending inventory, requirement 2 Total requirements Beginning inventory, given Purchases $3,000 Sales, given Cost of sales (60%) Gross profit Other variable costs (20%) Contribution margin Fixed costs, given Income before taxes Taxes, at 25% Net income
$ 30,000 78,000 108,000 59,000 $ 49,000 $ 50,000 30,000 20,000 10,000 10,000 6,000 4,000 1,000 $ 3,000
Dollars Pounds x $3 $ 600 132 732 102 $ 630
5.
$2,800 Balance, 12/31 (given in balance sheet) Receipts from sales, requirement 1 Total Disbursements: December purchases (accounts payable at 12/31) January purchases (80% of requirement 3) Variable cost for January (20% of January sales) January fixed costs, cash only Taxes on December income (liability at 12/31) Balance
$ 33,000 41,000 74,000 $ 9,000 39,200 10,000 5,000 8,000
6.
$48,000 ($60,000 x 80%)
7.
$99,000 [$102,000 - (3 x $1,000)]
8.
$7,800 (20% x $39,000) March cost of sales (60% x $70,000) Inventory 3/31 [60% x ($66,000 + $65,000)] Required Inventory 2/28 [60% x ($70,000 + $66,000)] Purchases
$ 42,000 78,600 120,600 81,600 $ 39,000
$29,800 Retained earnings, 12/31 Budgeted net income (requirement 4) Total Dividend Budgeted retained earnings, 1/31
$ 28,000 3,000 31,000 1,200 $ 29,800
9.
71,200 $ 2,800
10. $2,000, from March tax accrual. accrual. Taxes are paid in the the month after accrual per per item g. Sales $ 70,000 Cost of sales at 60% 42,000 Gross profit 28,000 Other variable costs at 20% 14,000 Contribution margin 14,000 Fixed costs 6,000 Income before taxes $ 8,000 Income taxes at 25% $ 2,000 19. a.
b. c. d. e. f. g.
March receipts: $264,000 [($240,000 x 60%) + ($300,000 x 40%)] Receivables at end of March: $180,000 [$300,000 x (100% - 40%)] Inventory at end of February: $420,000 ($300,000 x 70% x 2) February purchases: $252,000 [($240,000 x 70%) + ($300,000 x 2 x 70%) – ($240,000 – ($240,000 x 2 x 70%)] March payments: $282,400 [(252,000 x 20%) + ($290,000 x 80%)] AP at end of February: $50,400 ($252,000 x 20%) Cash at end of March: $2,600 ($25,000 + $264,000 - $282,400 - $24,000)
